Health and Economic Risks of Corona Pandemic and Recommendations - Virtual Media Briefing
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বাংলােদেশর unয়েনর sাধীন পযর্ােলাচনা
Virtual Media Briefing
Health and Economic Risks of Corona
Pandemic and Recommendations
Dhaka: 21 March 2020
www.cpd.org.bd
CPD IRBD 2020 Team
Lead contributions were provided by Dr Fahmida Khatun, Executive Director;
Professor Mustafizur Rahman, Distinguished Fellow; Dr Khondaker Golam
Moazzem, Research Director; and Mr Towfiqul Islam Khan, Senior Research
Fellow, CPD.
Excellent research support was received from
Senior Research Associates
Mr Mostafa Amir Sabbih Mr Muntaseer Kamal
Mr Md. Al-Hasan Mr Syed Yusuf Saadat
Programme Associates
Mr Abu Saleh Md. Shamim Alam Shibly Ms Nawshin Nawar
Mr Tamim Ahmed Mr Md Jahurul Islam
Ms Iqra Labiba Qamari
Interns
Ms Fariha Islam Munia Ms Samanta Islam
Mr Towfiqul Islam Khan was the Coordinator of the CPD IRBD 2020 Team.
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 2
Acknowledgements The CPD IRBD 2020 Team would like to register its profound gratitude to Professor Rehman Sobhan, Chairman, CPD for his advice and guidance in preparing this report. The CPD IRBD Team also expresses its sincere thanks to Dr Debapriya Bhattacharya Distinguished Fellow, CPD for his inputs and support. The Team gratefully acknowledges the valuable support provided by the Dialogue and Communication Division, CPD in preparing this report. Contribution of the CPD Administration and Finance Division is also highly appreciated. Assistance of Ms Tahsin Sadia, Executive Associate is particularly appreciated. Concerned officials belonging to a number of institutions have extended valuable support to the CPD IRBD Team members. In this connection, the Team would like to register its sincere thanks to Bangladesh Bank (BB), Bangladesh Bureau of Statistics (BBS), Bangladesh Investment Development Authority (BIDA), Dhaka Stock Exchange (DSE), Export Promotion Bureau (EPB), Ministry of Finance (MoF), National Board of Revenue (NBR), and Planning Commission. The CPD IRBD 2020 Team alone remains responsible for the analyses, interpretations and conclusions presented in this report. CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 3
Contents Section 1: Introduction Section 2: State of the Global Economy in view of the Coronavirus Crisis Section 3: Transmission Channels for the Bangladesh Economy Section 4: Current State of Bangladesh Economy in view of the Coronavirus Crisis Section 4.1: External Sector Performance Section 4.2: Disruption of Supply Chains in Major Economic Activities Section 4.3: Healthcare Section 4.4: Public Finance Section 4.5: Monetary Policy Section 5: Policy Recommendations CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 4
Section 1:
Introduction
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 5
Introduction In view of the COVID-19 emergency, it is important for Bangladesh to be appropriately ready and to take necessary preparations to deal with both immediate and medium term ramifications of this outbreak at the earliest COVID-19 is going to have serious implications for health sector preparedness and macroeconomic management of Bangladesh This has important implications for reprioritisation, resource reallocation and fiscal-monetary policies and measures to be pursued by Bangladesh to near and medium terms As Bangladesh prepares for the upcoming budget for fiscal year (FY) 2020-21, it is important to understand the extent of resource requirement for healthcare and economic management To this end, the Centre for Policy Dialogue (CPD) has undertaken the current exercise which mainly addresses two broad issues: (i) what are the transmission channels of the COVID-19 outbreak that may have impacts on the economy? (ii) what can the policymakers do to overcome the challenges of COVID-19? CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 6
Introduction According to World Health Organisation (WHO), coronaviruses (CoV) are a large family of viruses that cause illness Such illness range from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV) Coronavirus disease (COVID-19) is a new strain that was discovered in 2019 Coronaviruses are zoonotic, meaning they are transmitted between animals and people Though previously there have been many pandemics, those were region specific They were also found mostly in less advanced countries Coronavirus has hit all types of countries Coronavirus is found to be one of the most dangerous and disruptive disease so far in human history CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 7
Introduction On 8th December 2019, there was onset of symptoms in the first known case of pneumonia with unknown etiology in Wuhan City, Hubei Province, China On 31st December 2019, China reports a cluster of cases of pneumonia with unknown etiology in Wuhan to the WHO. China reported 27 cases and 0 deaths at that point in time On 7th January 2020, Chinese scientists identify the pathogen as a novel coronavirus On 30th January 2020, WHO declared a “public health emergency of international concern”. At that time, China reported 7736 conformed cases and 170 deaths. Outside China, 82 confirmed cases were found, but no deaths Since then the coronavirus also known as COVID-19 has spread at a rapid speed As of 20 March 2020, the coronavirus COVID-19 has affected 178 countries and territories around the world with 244,282 coronavirus cases, 10,006 deaths and 87,407 recovered cases WHO announced COVID-19 outbreak a pandemic on 12 March 2020 CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 8
Introduction COVID-19 pandemic is apprehended to have serious health and economic implications This is considered to a global health and societal emergency that requires effective immediate actions by governments, the private sector and individuals In Bangladesh, 20 cases were detected, 1 death and 3 recovered cases as of 20 March 2020 Given the nature of the disease it is unpredictable as to what will be the nature and extent of health and economic losses International organisations have made preliminary estimations on economic losses. However, the impact will depend on the duration of the diseases and the type of remedial measures taken to tackle the disease CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 9
Introduction
We have looked into the implications of COVID-19 on the Bangladesh
economy at two levels: from global to national, and, at the national level
While looking into the transmission channels of the impact, we have
looked into five sectors which are critically important for Bangladesh
economy. These are:
External Sector Performance
Disruption of Supply Chains in Major Economic Activities
Healthcare
Public Finance
Monetary Policy
In view of the emergent scenario, CPD has proposed a set of policy
initiatives and measures to address attendant implications
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 10Section 2:
State of the Global Economy in view of the
Coronavirus Crisis
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 11State of the Global Economy The impact of COVID-19 is apprehended to be unprecedented and will have lasting economic damage on the global economy Before COVID-19 outbreak in January 2020, it was predicted that the global economy will grow at 2.7% (UNCTAD calculation based on IMF, WEO). These numbers have been revised downward IMF earlier had projected that global economic growth is expected to rise from 3.0% in 2019 to 3.3% in 2020 and 3.4% in 2021 However, IMF has now made a downward revision of 0.1 percentage point for 2019, 1.7 percentage point for 2020 and 0.2 percentage point for 2021 compared to those predicted in the October 2019 (3.0% in 2019, 3.3% in 2020 and 3.4% in 2021) issue of the World Economic Outlook (WEO) report of the IMF CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 12
Economic Outlook
Economic outlook of selected countries (GDP Year on Year growth in %)
2019 2020 2021
2019 2020 2021
(Revised (Revised (Revised
Region/Country (Previous, (Previous, (Previous,
March March March
Oct. 2019) Oct. 2019) Oct. 2019)
2020) 2020) 2020)
World 2.9 3.0 1.6 3.3 3.2 3.4
USA 2.3 2.4 0.7 2.0 0.9 1.7
Eurozone 1.2 1.2 -0.1 1.3 1.2 1.4
-Germany 0.6 0.5 -0.3 1.1 1.1 1.4
-France 1.3 1.2 0.3 1.3 1.4 1.3
-Italy 0.2 0.0 -1.6 0.5 0.7 0.7
-Spain 2.0 2.2 0.7 1.6 1.1 1.6
United Kingdom 1.4 1.2 0.3 1.4 -0.3 1.5
China 6.1 6.1 2.4 5.8 5.9 5.8
Japan 0.8 0.9 -0.4 0.5 1.3 0.5
India 5.3 6.1 5.3 7.0 6.4 6.5
Brazil 1.2 0.9 1.8 2.0 2.4 2.3
Australia 1.8 1.6 1.2 1.6 2.3 1.6
Source: Macrobond, IMF, RaboResearch & IMF World Economic Outlook (March 10, 2020)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 13Possible Economic Losses
due to COVID-19
Comparative scenario of possible economic losses due to COVID-19 by the
different organizations
Europe Asia
World World World World
World World
Organisation GDP loss trade loss trade trade
GDP loss GDP loss
(%) (% of GDP) loss (% loss (%
(%) (%)
of GDP) of GDP)
UNCTAD 1.7 0.6 0.4 0.3 0.2
OECD 2.4 1.0 0.7 0.3 0.3 -
ADB 0.2 0.40 0.6 0.5 0.01 -
IMF 1.6 0.3 0.1 0.7 0.2 -
Source: Compilation from the published reports of the mentioned organizations
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 14Global Economic Growth Slowdown
2019 2020 (Old Forecast) 2020 (New Forecast)
7.0
6.1
6.0 5.8
Real GDP Growth (%)
4.9
5.0
4.0
2.9 2.9
3.0
2.4 2.2 2
1.9
2.0
1.1 1
1.0 0.7 0.7 0.6
0.2
0.0
World US Euroarea China Japan
Source: OECD Economic Outlook Report (March 2020)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 15Global Stock Market Scenario
Shanghai Stock Exchange Composite
UK FTSE 100 Stock Market Index
Index
8000
3400
7500
3200
7000
3000 6500
2800 6000
5500
2600
5000
2400
Nov'18
Apr'19
Nov'19
Sep'18
Oct'18
Dec'18
Sep'19
Oct'19
Dec'19
May'19
June'19
Jan'20
Feb'20
Mar'20
Aug'18
Aug'19
Mar'19
July'19
Jan'19
Feb'19
Italian FTSE MIB Index
US Dow Jones Index Industrial Average value
29827 25000
27827 23000
25827 21000
23827 19000
21827 17000
19827 15000
Source: Trading Economics
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 16Economic Impacts of COVID-19 It is apprehended that the impact of COVID-19 and the global economy can be severe and the global economy may fall into recession through the following channels: Direct impact on production: The slowdown in China will have impact on exporters to China Supply chain and market disruption Most of the manufacturing firms are highly dependent on the imported intermediary inputs from China. Many large companies rely on the sales in China to achieve their financial targets Financial impact on firms and financial markets Disruption of inputs and production may put a pressure on some firms; particularly, the companies with inadequate liquidity will be under stress. There might be the possibility for the firms to reduce their engagement in the equity and corporate bond market due to the uncertainties happened by the outbreak. CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 17
Economic Impacts of COVID-19 (Cont.) Major areas of impact: tourism, disruption in retail due to decline in consumption & demand, e-commerce may boost, supply chain disruptions hurt telecom and technology, automotive production stalled, energy sector is vulnerable, windfalls for pharma but challenges around The effect of this outbreak is still uncertain and evolving continuously as more and more cases are found in more and more countries The impact will depend on the duration of the outbreak, number of affected people and countries, and the lethality of the outbreak Global community has called for a coordinated policy actions to address the ramifications of COVID-19 Initiatives such as “World Economic Forum COVID-19 Action Platform” are needed to enhance business support and protect the livelihoods of people CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 18
Relief Packages of
Different Countries
The People’s Bank of China has cut down on bank reserve requirement to make $79
CHINA billion available for lending purposes to companies that have been suffering due to the
crisis (QUARTZ, 18 March, 2020)
The 25 billion euro worth economic support package has been authorised to support
ITALY companies and workers. Extra funding will be allocated to the healthcare system as well
cater to increasing unemployment benefits, freezing tax and loan payments to prevent job
losses. (QUARTZ, 18 March, 2020)
A stimulus package worth of $219 billion is to be allocated for virus aid out of which $110
SPAIN billion will be provided by the government to companies to protect them during the
lockdown (Bloombeerg, 17 March, 2020)
The government had announced a $9.8 billion of emergency funding to shield the impact
SOUTH of the crisis on the economy. Additional funds will be provided in the form of treasury
KOREA
bonds and limitations have also been imposed on short-selling transactions (REUTERS, 16
March, 2020)
A total of 45 billion euros has been approved to aid companies and employees. The
FRANCE government is also being lenient towards companies in terms of social charges and tax.
Sate-subsidised work schemes is also being implemented temporarily (QUARTZ, 18 March, 2020)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 19Relief Packages of
Different Countries (Cont.)
The government in Berlin has decided to compose a stimulus package worth of 550
GERMANY billion euros and offer unlimited credit to cushion companies against any backlash
(France 24, 13 March, 2020)
The government has asked IMF for $5 billion for emergency funding and a concrete
IRAN relief package catering to containing the crisis is yet to be announced (REUTERS, 12 March,
2020)
The president has signed an emergency aid package of $100 billion which would also
USA ensure paid sick leaves and fee testing. Policies surrounding tax payment are being
relaxed. Grants to support the airlines industry, small business are being seriously
considered to be incorporated in the stimulus package (abc News, 19 March, 2020)
The government of UK has assembled a package of 300 billion pounds to offer state-
backed loans to businesses. Small entities operating in retail, hospitality and leisure
UK would be able to apply for up to cash grants of up to 25,000 pounds. Officials had also
announced a 30 billion pounds of emergency spending (11 March) that would go to
National Health Service (NHS), sick pay for employees, etc. (The Telegraph, 17 March, 2020)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 20Section 3:
Transmission Channels for the
Bangladesh Economy
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 21Transmission Channels for the Bangladesh
Economy: Global Level
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 22Transmission Channels for the Bangladesh
Economy: Domestic Uncertainties
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 23Section 4:
Current State of Bangladesh Economy in
view of the Coronavirus Crisis
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 24Section 4.1:
External Sector Performance
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 25COVID-19 and the
External Sector of Bangladesh
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 26COVID-19 Affected Countries
and Bangladesh’s Export Destinations
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 27COVID-19 and Destination
of Major Export Items
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 28COVID-19 Affected
Countries and Import Sources
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 29COVID-19 Affected
Countries and Remittance Sources
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 30External Sector Performance Scenario
COVID-19’s adverse implications are being felt at a time when Bangladesh's
external Sector is under considerable pressure in several fronts:
Export target for FY2020 (12% growth) is highly unlikely to be attained in
view of the negative growth over the first eight months of FY 2020 (-4.8%)
Major export items such as knitwear (-5.7%), woven wear (-5.9%), home
textile (-7.5%), frozen fish (-4.4.%) and leather and leather products (-
9.1%) posted negative growth
Import growth over the first seven months of FY2020 was negative (-2.7%)
Important import sub-components such as intermediate goods (-2.1%) and
capital goods (-8.3%) including capital machineries (-22.0%) posted
negative growth
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 31External Sector Performance Scenario
Remittance sector however registered positive growth in terms of robust
growth of inflows over first seven months (+21.5%), and a rise in numbers
of migrant workers going abroad (+4.2%)
During first six months of FY 2020, the negative trade balance (-8.2 billion
US$) and services balance (-1.7 billion US$) could hardly be balanced by
the positive secondary income (rising to +9.6 billion US$ thanks mainly to
remittance) and declining financial account (falling to +1.8 billion US$)
As a consequence, overall BoP position in December 2019 (+0.027 billion
US$), while somewhat better than December of the previous year (+27.0
million compared to – 513.0 million US$), remained weak
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 32Implications of COVID 19
on External Sector Performance
Already export sector has started to feel the adverse effects of COVID 19
Supply chain of key sectors such as RMG got disrupted: particularly in the initial
period because of snags in import of raw materials from China (Yarn: more than
half; synthetic yarn: two-thirds; fabrics: three-fourths), as also of assembling plant
including electric equipment (more than half)
Exports are being negatively affected both from import side particularly from
China and export side: backward and forward supply chains disrupted; execution
of orders delayed; shipments deferred; L/C payments facing problems; business
travels halted; uncertainties as regards future demand
The likely adverse effects of a global recession on demand for export, further
accentuating current negative performance
While the fall in oil and consequently commodity prices could help Bangladesh, on
account of lower import payments, and also lower domestic demand, resulting in
arresting further weakened of BoP scenario, this could lead to a low-level
equilibrium with consequent negative implications for investment, trade-related
activities and in the final analysis in slowing down the pace of GDP growth
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 33Section 4.2
Disruption of Supply Chains in Major
Economic Activities
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 34Immediate Impact on Major
Supply Chains: Newspaper Reports
Immediate Impact in different sectors/activities
• Agriculture sector: export of crab & eel, supply of onion, garlic & ginger,
prices of spices, lentil, pepper, turmeric, sugar & palm oil
• Manufacturing sector: Finish leather and leather goods; garments
accessories and packaging, pharmaceuticals, cosmetics and toiletries, woven
and knit industry, live and chilled food, plastic, electrical merchandise
manufacturers industry, jute spinners industry, medical instrument and
hospital equipment, eyeglass, computer & computer accessories, electronics,
jute spinning, medical instrument and hospital equipment
• Services sector: travel & tourism- airlines, air cargo carriers, tourists,
hotel, MICE (meetings, incentives, conferences and events)
• Wholesale & retail trade- sales of non-essential products such as
electronics, garments, leather goods, shoes & furniture
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 35Prices of Food Products
Rise in retail prices in Dhaka city between Dec 15, 2019 to March 14, 2020
80 72.41
70
60
50
39.29
40
30.43
30
20.45
20 14.04 13.33 12.12 11.11 9.46 9.46 7.25 7.25
10 6.52 6.52 6.51 6.51 6.48 6.25 4.55 2.94 2.04 1.59 1.59
0
Palm oil Super
Palm oil Super
Mung Bean/ Moog Dal (Quality
Beaf
Lentil (Turkey/ Canada- Medium
Cardamom/ Elach
Palm oil (loose)
Palm oil (loose)
Lentil (Turkey/ Canada- Large Size)
Rice (Medium)
Mutton
Atta (Packet)
Hilsha Fish
Chicken (Broiler)
Thin rice
Soy bean oil (Bottle 5 litre)
Soy bean oil (Bottle 5 litre)
Rice Thick (Sarna/ China/ Irri)
Cotton Fish/Rui
Garlic (Imported) Quality basis
Garlic (Domestic) Quality basis
Soy bean oil (Loose)
Soy bean oil (Loose)
basis)
Size)
According to TCB, changes in retail prices of food products in Dhaka city during December, 2019
and March, 2020 have experienced two opposite trends.
Major rise in prices was happened in case of garlic (70%), lentil (39%), fish (14%), mutton
(13%), chicken (11%), palm oil (9.5%), rice (7%), packed atta (7%) and soy bean oil (6.5%):
Slowed down of import and/or low level of supply of domestic production may cause this
rise.
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 36Prices of Food Products (Cont.)
Decrease in retail price in Dhaka city between Dec 15, 2019 and March 14, 2020
0
-2.13 -2.50 -2.56
-4.76 -4.76
-10 -6.67
-9.68 -10.53
-11.76 -12.50
-14.29 -14.81
-15.58
-20
-20.00
-21.43
-25.71 -26.83
-30
-31.82
-40
-40.00
-50 -48.00
-50.00
-55.00
-60
Cloves/ Lobongo
Coriander/ Dhonia pata
Onion
Garlic
Flour (Open)
Turmeric (Holud)
Onion (Domestic)
Atta White (Open)
Onion (Imported)
Anchar Dal
Red Lentil
Cumin/ Jira
Chickpea/ Chola (Quality Basis)
Cinnamon/ daruchini
Flour (Packet)
Soy bean oil (Bottle 1 litre)
Soy bean oil (Bottle 1 litre)
Chicken (Domestic)
Ginger (Quality basis)
Bay leaf/ Tejpata
Potato
Dry Chili
Major decline in retail prices occur in case of onion (-55%), dry chilli (48%), potato (-40%),
turmeric (-26%), ginger (-14%): Rise in the supply of domestic production and import from
different sources (China plus) are likely to contribute in slowing down the retail prices.
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 37Import of Food, Intermediate Goods & Capital
Machinery (July-Jan of FY 19 & FY20)
Changes in Import of Food and Consumer Goods (MoM) during
500 FY2019 and FY2020
400
300
200
100
0
-100
-200
1. Rice 2. Wheat 2. Spices 3. Edible oil 4. Pulses (all 5. Sugar
Jul Aug Sep Oct Nov Dec Jan sorts)
Import of food and consumer goods experienced variation at a limited scale after the
outbreak of coronavirus in December, 2019.
China is not the main source of import for most of the food products. Import from China
and other sources have contributed to less variation during these months.
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 38Import of Food, Intermediate Goods & Capital
Machinery (July-Jan of FY 19 & FY20)
Import of intermediate goods and capital machineries experienced more fluctuation
during this period
China the main source of import for most of those products. Restrictions in import from
China have contributed to high variation.
Changes in Import of Intermediate Goods and Capital Machinery (MoM) during FY2019 and
200
2020
150
100
50
0
-50
-100
11. Yarn
10. Raw cotton
3. POL
Capital machinery
1. Clinker
5. Chemicals
7. Fertilizer
12. Textile and articles thereof
13. Staple fibre
14. Iron, steel & other base
9. Plastics and rubber articles
2. Crude petroleum
6. Pharmaceutical products
metals
thereof
Jul Aug Sep Oct Nov Dec Jan
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 39Major Sources of Import of
Food and Agricultural Products
Product: 06
Product: 04
Live trees and
Dairy produce; Product: 07 Product: 08
Product: 02 other plants; Product: 09
Product: 03 birds' eggs; Edible Edible fruit
Product: 01 Live Meat and bulbs, roots and Coffee, tea, Product: 10
Fish and crustaceans, molluscs and other natural honey; vegetables and and nuts; peel
animals edible meat the like; cut maté and Cereals
aquatic invertebrates edible products certain roots of citrus fruit
offal flowers and spices
of animal origin, and tubers or melons
ornamental
not elsewhere ...
foliage
New Zealand
France (24.5) India (82.6) Myanmar (41.6) Viet Nam (51.8) Australia (47.5) China, 46.5 India (33.71) India (23.92)
(55.6)
Russian
United States of South Africa
France (5.9) India (23.1) India (8.6) China (26.5) Canada (18.1) China (20.9) Federation
America (23.6) (16.9)
(21.12)
United Kingdom Guatemala
Australia (4.9) China (20.8) Australia (8.3) India (12.2) India (13.8) Brazil (3.7) Canada (11.76)
(12.1) (17.31)
New Zealand United Arab Czech Republic
Uruguay (4.1) Thailand (3.4) China (6.6) Thailand (2.8) Singapore (8) Brazil (11.15)
(9.5) Emirates (3.5) (5.1)
Russian
Netherlands Indonesia Viet Nam
Brazil (1.5) Thailand (2.5) Denmark (3.5) Malaysia (1.6) Federation Ukraine (10.15)
(7.8) (2.1) (5.74)
(3.2)
Netherlands Myanmar United States of
Malaysia (6.0) Malaysia (0.4) Netherlands (2.2) Ireland (2.3) Myanmar (3.2) India (1.9)
(1.4) (3.92) America (6.81)
Product: 11 Product: 15 Product: 19
Products of the Product: 12 Animal or vegetable Preparations of Product: 20
Product: 17 Product: 18 Product: 22
milling industry; Oil seeds and oleaginous fruits; fats and oils and their cereals, flour, Preparations of
Sugars and sugar Cocoa and cocoa Beverages, spirits and
malt; starches; miscellaneous grains, seeds and cleavage products; starch or milk; vegetables, fruit, nuts or
confectionery preparations vinegar
inulin; wheat fruit; industrial or medicinal ... prepared edible fats; pastrycooks' other parts of plants
gluten animal ... products
Thailand (41.06) United States of America (72.56) Indonesia (49.3) Brazil (90.86) Malaysia (24.29) India (36.01) China (19.83) Singapore (41.89)
United Arab Emirates
India (19.2) Canada (6.89) Argentina (25.44) India (3.83) India (21.4) Denmark (16.51) United Kingdom (12.03)
(18.46)
Germany (8.05) Brazil (5.17) Malaysia (12) China (2.02) Singapore (15.05) Belgium (11.54) Belgium (10.69) Belgium (6.47)
Pakistan (7.45) India (2.65) Brazil (7.51) Germany (0.41) Indonesia (7.73) Australia (8.58) Thailand (10.07) Netherlands (3.65)
Korea, Republic of
Russian Federation (1.75) Paraguay (4.5) Malaysia (0.38) Turkey (6.92) Malaysia (5.2) Singapore (9.2) United Kingdom (3.62)
(3.37)
United Arab United States of America
China (2.39) Australia (1.74) China (0.21) Australia (0.37) Thailand (4.75) Thailand (3.4)
Emirates (5.23) (7.37)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 40Major Sources of Import of Intermediate
Products, Machineries & Others
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 41Major Sources of Import of Intermediate
Products, Machineries & Others (Cont.)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 42Domestic Production of
Agricultural Products
450 25.0
400 21.1
20.0
350 17.9
14.4 15.0
300 12.9
250 9.3 10.0
8.4 7.7
7.4
200 5.8 5.0
3.6
150 1.8 2.1
1.0
0.0
100 -1.4
-5.0
50 -6.7
0 -10.0
Aman Aus Boro Wheat Potato Veg (w) Veg (s) Soy bean Lentil Lentil Onion Ginger Garlic Tarmaric Chilli
(M) (Total)
FY2018-19 lakh m ton FY 2019-2020 (T) lakh m ton % change
• According to the DAE, production of major agricultural products during FY2020 is
likely to be higher compared to that in the last year (FY2019)
• Figure shows that all types of rice, wheat, vegetables, soy bean, lentil, onion
garlic & chili have been targeted to produce at a higher level in the current year
compared to that in the previous year
• Production of potato and turmeric may produce less in this year.
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 43Public Food Stock
Food reserve under the PFDS is higher in FY2020 compared to that in FY2019
Until March 15 2020, the government had the reserves of food grains,
especially rice and wheat, at 17.62 lakh m tons, which is about 1.85 lakh m
tons higher than the same period of the last year
As of 18 March, 2020, total public food stock is 17.4 lakh ton of rice & 3.19
lakh ton of wheat
Import of rice and wheat has been ongoing during FY2020
Till March 12, 2020 about 51.79 lakh m. tons of food has been imported of
which wheat is 51.74 tons and rice is 4000 tonnes
Government has taken preparation for ensuring available supply of some of
products specially need during Ramadan season (to be started end of April, 2020)
In the first eight months (July-February) of FY2020, the import of chickpea
through Chittagong port has been estimated to be 199471 tons
According to the Ministry of Commerce, the demand is around one and a half
million tonnes
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 44Businesses and Employment
Business and employment would confront adverse impact if economic
activities need to shut down in case the coronavirus outbreak in the country
Service sector related enterprises would be affected more which include
hotel & restaurants, wholesale and retail; trade and banks, insurance and
financial services
Impact would be higher in small scale enterprises and those operate
informally for not having any contingency plan
Manufacturing sector particularly export-oriented RMG and textiles
industries would be affected most
Workers usually work under temporary contractual arrangement particularly
those work in small scale and informal enterprises would be affected most.
Workers who work in labour-intensive formal and export-oriented
industries would be adversely affected
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 45Supply Chain Risks in Bangladesh
The domestic supply chains are at different levels of risks at the current state
of outbreak of coronavirus. However, levels of risks across all sectors will rise
cumulatively in case the virus outbreak intensifies
Most of the supply chains in the agriculture sector are at stable state with
minor adversity in supplies and prices
Most of the domestic market-oriented manufacturing supply
chains have partially affected both in supplies and prices due to
disruption in import of raw materials from China
Main export-oriented manufacturing supply chain, RMG has been
gradually affected at higher levels with withholding/lowering/withdrawing
orders at different levels and finally at the risk of closing down of factories.
Other export-oriented industries/products (leather, pharmaceuticals
and agro-processed products) have got affected
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 46Supply Chain Risks in Bangladesh
Most affected sectors both at present and possibly in the future would be
service sector & related activities. Tourism/travel is the most affected
sector which include airlines, hotels, restaurants, MICE and tour
operators. Other service sectors/activities such as wholesale/retail
trading, shops and transport are being affected at different levels
Key adverse impact would occur in the form of possible health hazards of
workers, demand shock, supply shock of raw materials, intermediate
products, machineries, difficulty in repaying loan, lack of financing facility in
flexible terms, temporary shut down of operation and closed down of
factories/businesses
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 47Section 4.3:
Healthcare
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 48Response of the Government of Bangladesh
At present, passengers returning from countries highly
affected by COVID-19 are being screened using
rudimentary tools, such a thermometer or thermal
scanner
Those who are displaying known symptoms of
COVID-19 are being isolated in hospitals
Those who are not showing any signs of the disease
are being advised to ”home quarantine” for two weeks
Unfortunately, it cannot be assessed if the
returning passengers are taking such advice
seriously since there is no monitoring or
enforcement mechanism
In fact, COVID-19 entered Bangladesh through
returning migrant workers from Italy, and is now
spreading exponentially
Moreover, in the initial stages of the disease,
COVID-19 can be present inside a person’s body
without showing any visible signs
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 49Response of the Government of Bangladesh
(cont.)
A directive was given by the Honorable Prime Minister to avoid mass
gatherings (Dhaka Tribune, 10 March, 2020)
Restriction was imposed on public transport movement at some places in
Madaripur’s Shibchar upazilla (Daily Star, 20 March, 2020)
Most shops, including cosmetics, furniture and electric appliances, in
vulnerable areas were closed down, but markets of daily necessities would
remain open (Daily Star, 20 March, 2020).
Leaves of all health sector officials were cancelled by the government (Daily
Star as of 20 March, 2020)
DGHS ordered 1 lakh kits developed by Gonoshasthaya Kendro that can
detect a COVID-19 case within minutes (Daily Star, 20 March, 2020).
Army has been given the charge of running the two quarantines: Ashkona
Hajj Camp near the Hazrat Shahjalal International Airport, and Rajuk
Apartment Project near Diyabari of Uttara-18 (Daily Star, 20 March, 2020).
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 50Response of the Government of Bangladesh
(cont.)
Tongi ijtema gorund will be readied to gear up the further quarantine
facilities (Daily Star, 20 March, 2020).
All bus services between Dhaka and Rajshahi have been cancelled (Daily Star,
20 March, 2020)
Health ministry received an allocation of taka 200 crore in additional funds
for the treatment of the patients (Daily Star, 20 March, 2020)
DNCC formed a committee to take steps to ensure home quarantine (Daily
Star, 20 March, 2020)
The DNCC committee declared closure of all of its community centers to
avoid mass gatherings (Daily Star 20 March, 2020)
Mobile court would be set up to ensure the home quarantine (Daily Star, 20
March, 2020)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 51Responses of Other Governments to COVID-19
ITALY
CHINA (35713 cases: 2978 deaths)*
SPAIN
(81174 cases; 3242 deaths)* (13716cases; 598 deaths)*
Entire country operating under a
Emergency lockdown;
“red zone”, schools, shops and
Aggressive quarantine, public nationalisation of all private
restaurants closed, sports events
monitoring & city-wide lockdown. hospitals
cancelled. (Business Insider, 16 March 2020)
The Guardian, 9 March 2020)
(REUTERS, 16 March 2020)
SOUTH KOREA GERMANY
FRANCE (8198 cases; 13 deaths)*
(8413 cases; 84 deaths)* (9043 cases; 244 deaths)*
Large scale home quarantine, set- Tax relief given to firms,
Countrywide lockdown; military government-level assistance to
up of drive-through screening and police deployed to ensure
clinics, subsidisation of small impacted firms, cancellation of
people do not leave house. public events.
firms. (CNBC, 17 March 2020)
(The Wall Street Journal, 16 March,2020) (The Berlin Spectator, 18 March 2020)
IRAN UK
USA (2630 cases; 103 deaths)*
(17361 cases; 1135 deaths)* (7087 cases; 100 deaths)*
Public gatherings cancelled, Schools closed and exams
Free COVID-19s testing,
international flights to Europe cancelled, strict limitations on
increased benefit for
banned, citizens asked to stay the mobility of people, work from
unemployed, paid leave, etc.
home. (abc News, 19 March, 2020)
home policy encouraged.
(Al Jazeera, 18 March 2020) (BBC, 19 March, 2020)
*Statistics given are number of total COVID-19 cases and total deaths respectively taken from Situation Reports of WHO., as per 19 March, 2020)
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 52Rapid Escalation of COVID-19 in Italy in 5 Days
11 Mar 2020
On 20 March 2020, death toll rose 9 Mar 2020 Stage 6
to 3405, the highest in the world
8 Mar 2020 Stage 5 10149 cases;
631 deaths
7 Mar 2020 Stage 4 7375 cases;
366 deaths
22 Feb 2020 Stage 3 5883 cases;
234 deaths
11 Feb 2020 Stage 2 4636 cases;
197 deaths Healthcare Entire Quarantine is
Stage 1 9 cases;
system country is imposed,
0 deaths Cases double
3 cases; collapses due under self- most
Number of in a day &
0 deaths to surge in imposed businesses
cases rise & there are
cases & lack quarantine, are closed,
First few some regions more deaths;
of resources; but all people found
cases appear; are schools &
some businesses outside
people feel quarantined; universities
people are are still open without valid
it’s nothing people still are closed but
left to die as and some reason are
to worry continue other
treatment people are fined €206,
about and life as usual businesses
must be still while COVID-
some believe and feel only remain open,
provided continuing 19 patients
it’s only a flu the elderly while 10,000
selectively— life as usual found outside
are at risk escape from
war-like are jailed
quarantine
situation
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations Source: Situation reports, WHO 53Bangladesh’s Preparedness:
Healthcare Infrastructure & Equipment
every 1,196 persons
1 hospital bed
for
Source: Directorate General of Health Services (DGHS), 2017
54
CPD (2020): Health and Economic Risks of Corona Pandemic and RecommendationsBangladesh’s Preparedness:
Healthcare Infrastructure & Equipment
Among the healthcare facilities in Bangladesh,
5.1% have 21.5% have 28% have all 34.5% have
27.5% have
emergency alcohol- basic lab facilities
medical
transport based equipment
disinfectant masks
43.1% have 55.1% have 83.7% have 86.3% have 90.1% have
regular soap and improved
paracetamol thermometer
electricity water water
oral source
suspension
Source: Bangladesh Health Facility Survey 2017 55
CPD (2020): Health and Economic Risks of Corona Pandemic and RecommendationsBangladesh’s Preparedness:
Healthcare Personnel
1 registered physician
for
every 1,581 persons
CPD (2020): Health and Economic Risks of Corona Pandemic and RecommendationsSource: Health Bulletin 2018, DGHS 56Bangladesh’s Preparedness:
Healthcare Personnel
Among the healthcare facilities in Bangladesh,
28% 59.1% 79.7%
have
specialistsi have general have nurses
practitionersii
Source: Bangladesh Health Facility Survey 2017
Note: i) Specialist (consultant) medicine [including cardiology], specialist (consultant) general surgery, specialist (consultant) obstetrics/gynecology,
specialist (consultant) pediatrics, specialist (consultant) psychiatry, specialist (consultant) anesthesia or any other specialist not listed above
ii) Medical officer (MBBS) (any non-specialist doctor, including assistant surgeon, emergency medical officer (EMO), indoor medical officer
(IMO), maternal and child health/family planning medical officer (MCH/FP), residential medical officer (RMO), regardless of designation or
title) or medical officer—anesthetist or dental surgeon.
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 57Longstanding Problems of Healthcare:
Poor Budget Allocation for Health
• Total allocation of the budget for health Health budget: as Share of GDP
sector in FY20 was Tk.25733 crore which 7.0 1.0
has increased by 15.2% over that of 6.0
0.8
5.0
RBFY19
Budget
4.0 0.6
GDP
3.0 0.4
• Allocation for health as share of 2.0
0.2
total budget has fallen (from 1.0
0.0 0.0
5.1% in BFY19 to 4.9% in BFY20)
FY12
FY13
FY14
FY11
FY10
FY15
FY17
FY18
FY16
FY19
FY20
RBFY19
• Since 2017, share of health budget
as% of GDP remain at 0.9% level % of Budget (total) % of GDP
• Government budget for health (as a Health budget: Per capita allocation (nominal & real)
share of GDP) is considerably lower (BFY 2010-BFY2020)
than the targets stipulated in the 1,800
1,537
1,600 1,412 1,349
7FYP and WHO benchmark 1,400 1,262
1,081
• 7FYP target: 1.12% of GDP: WHO
1,200
1,000 794 771 795
target: 5% of GDP 800
543
490
585
485
607 608
706
480 510
658
726 698
600 472 472 440
Per capita allocation for health sector (in 400
nominal terms) has slightly increased 200
0
(from Tk.1349 in RBFY19 to Tk.1537 in
FY10
FY15
FY17
FY12
FY13
FY14
FY16
FY19
FY11
RBFY19
FY18
FY20
FY20) but the rise is much lower in real
terms (less than Tk.100). Per capita nominal Per capita real
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 58Longstanding Problems of Healthcare:
High Out-of-pocket Healthcare Expenditure
The health system of Bangladesh relies heavily on the government for financing and setting overall policies and
service delivery mechanisms.
Although the health system is faced with many intractable challenges, it seems to receive little priority in terms
of national resource allocation.
The health system faces multifaceted challenges
Lack of public health facilities, scarcity of skilled workforce, inadequate financial resource allocation and
political instability
Government expenditure on health is only about 34% of the total health expenditure, the rest
(66%) being out-of-pocket expenses.
Out-of-pocket expenditure on healthcare in Bangladesh is the highest in South Asia.
Table 11.2: Out-of-pocket health expenditure in South Asia
Indicator 2008 2009 2015 2015
Bangladesh India Pakistan Sri Lanka Nepal Bhutan
Out-of-pocket expenditure
67.2 67.2 71.8 65.1 66.5 38.4 60.4 19.8
(% of current health expenditure)
Out-of-pocket expenditure, per capita PPP
36.2 39.0 63.2 143.4 88.9 226.9 91.1 56.9
(current international $)
Source: World Health Organization Global Health Expenditure database. (http://apps.who.int/nha/database). Accessed on 25 November 2018.
Note: Out-of-pocket expenditure per capita, PPP (current international $) is defined as Health expenditure through out-of-pocket payments per capita in
international dollars at purchasing power parity (PPP).
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 59Longstanding Problems of Healthcare:
Poor Utilisation of Health Budget
Utilisation of the overall health budget has been Level of Budget Utilisation
decelerating in recent years and it was lowest in 30,000 105
FY2018 (83.7%) during the last ten fiscal years. 25,000 100
20,000 95
• A detailed description on different activities of the
15,000 90
health sector has been mentioned in the budget
10,000 85
document
5,000 80
• Most of those are either ongoing or 0 75
completed projects
FY13
FY16
FY18
FY19
FY11
FY14
FY10
FY12
FY20
FY15
FY17
• New projects include: Three nursing colleges
Allocation Expenditure Utilisation
and five nursing hostels for boys will be
established in FY2019-20; Institutes of Status of Completion of ADP Projects
Name of the Project Tenure ADP Maximum
Nuclear Medicine and Allied Sciences Allocation possible
for 2019- completio
(INMAS) will be established at the campuses 2020 n by FY20
of 8 medical college hospitals. (In Crore (%)
Tk.)
• From ADP projects, 14 projects are selected on 3rd EDCL Industrial branch 12/31/2020 173 93.7
establishment at Gopalganj
the basis of Tk.100 crore and projects to be Establishment of Sheikh Sayera 6/30/2020 137 100.0
Khatun Medical College & Nursing
finished by FY19-21 . Institute (1st Revised)
Establishment of patuakhali Medical 6/30/2020 150 43.9
• Most of the projects are behind schedule in College & Hospital
terms of level of implementation. Urban Public & Environmental Health 6/30/2020 104 31.1
Sector Development Project (Revised)
Expansion of National Institute of 12/31/2020 115 34.8
Neurosciences & hospital
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 60Section 4.4:
Public Finance
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 61Public Finance
Public Finance
Inability to deliver on the planned budgetary targets in an efficient way has
continued in FY2020 – weakening state of macroeconomic management
As per MoF data, during the first six months (Jul-Dec) of FY20, majority of
the fiscal parameters apart from ADP will fall well short of their
respective targets
Table: Fiscal framework
Growth (%)
Component Target Actual Target Jul-Dec Required Jan-
FY19 FY19 FY20 FY20 Jun FY20
a. Total revenue 56.7 16.3 50.0 5.6 87.5
a.1 Tax revenue 57.4 16.3 50.5 5.6 86.9
a.1.1 NBR tax 58.3 16.8 48.9 5.9 83.5
a.1.2 Non-NBR tax 34.7 1.6 97.5 -1.5 198.8
a.2 Non-tax revenue 50.0 16.6 45.5 5.4 94.4
b. Total expenditure 44.3 21.7 33.6 16.5 41.7
b.1 ADP expenditure 44.7 23.3 37.5 32.4 38.8
b.2 Non-ADP expenditure 44.1 20.8 31.2 11.6 44.0
c. Overall deficit (excl. grants) 19.0 32.8 4.0 128.3 -7.0
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 62Public Finance
Revenue mobilisation
CPD, in its previous IRBD exercise, identified revenue mobilisation as one
of the four major stress points which require immediate policy attention
Total revenue-GDP ratio in FY2019 was merely 9.9%; while the tax-GDP
ratio was only 8.9%
Marginal improvement from FY18 but still considerably lower than
the level achieved in FY2012 (Total revenue-GDP ratio of 10.9%)
Revenue shortfall in FY2019 was Tk. 87,402 crore
Regrettably, it surpassed CPD’s projection of Tk. 85,000 crore
As per MoF data, during Jul-Dec of FY2020, total revenue collection
growth was only 5.6% over the corresponding period of FY19
Relevant growth target for the full FY2020 was 50.0%; total revenue
collection would have to increase by an unprecedented 87.5%
during Jan-Jun of FY2020
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 63Public Finance
If the ongoing trend continues, total revenue shortfall in FY20 is may
reach BDT 100,000 crore (based on projection using MoF data)
Uncertainty in the global economy and consequent repercussions for
Bangladesh economy may create added pressure on revenue mobilisation
during the remainder of FY20 and beyond:
Downturn in trade, particularly that of import values (both price and
quantity effect), may result in considerably lower collection of revenue
from customs duty, VAT and SD at the import stage
In view of the added uncertainty and increased medical expenditure in
case of a massive outbreak and job loss and lower income, particularly
in the informal sector, household may also spend less a prolonged
epidemic may result in a slump in business activities which in turn
could trigger lower collection of VAT, SD and income (both corporate
and personal) tax at the local stage
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 64Public Finance
Public Expenditure
Non-development expenditure during Jul-Dec of FY20 was characterised by a
moderate growth in subsidies (45.8%), pension and gratuities (37.5%), and
foreign interest payments (27.4%)
Subsidies and incentives started skyrocketing from October 2019 (365%
growth in October FY20 over October FY19)
Introduction of 1% cash incentive for the RMGs export and 2% cash
incentive for remittance senders contributed to this strong growth in
subsidies (both were effective from October 2019)
Bangladesh Bank in a recent circular (FE circular 08, 11 Mar 2020) further
extended 2% cash incentive on remittance to Bangladeshis working at the
United Nations, other global agencies abroad, and shipping and airline
companies owned by Bangladeshi or foreigners (but not the Bangladesh
government) – will raise subsidy burden further!
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 65Public Finance
After eight months of FY2020, government should have at least about Tk.
1,900 crore at hand from its subsidy amount even if it had exhausted all of it’s
promised allocation of Tk. 2,825 crore and Tk. 3,060 crore for export and
remittance cash incentives
Following the declining trend of RMG export growth and speculative decline of
remittances in the coming months due to COVID-19, GoB may have some fiscal
cushion from the subsidy allocation for these sectors during the next four months
of FY20 compared to the programmed amount
Falling oil prices in the international market in the aftermath of COVID-19
and oil-war between Saudi Arabia and Russia has provided opportunity to
BPC to make hefty profits and may provide some fiscal cushion to GoB
BPC made a profit of Tk. 10,741 crore during FY2016 and FY2017 oil price slump
which allowed it to pay Tk 2,200 (21% of total profit) to the government exchequer
as dividend
BPC is currently making a profit of around Tk. 23 crore per day since late Feb 2020
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 66Public Finance
According to IMED, during Jul-Feb ministries and divisions could spend
38.5% of the originally planned allocation of Tk. 202,721 crore for ADP
FY2020 – lower than the corresponding figures of FY19 (38.8%)
Lower utilisation (35.5%) of foreign aid (lower than both FY18 and FY19 for
the corresponding period) is a worrying sign in this regard
Slow project aid utilisation by
Roads and Highways Division (e.g. Dhaka Metro Rail project),
Ministry of Railway (e.g. Padma Rail Link Bridge),
MoST (e.g. Rooppur Project)
As per proposed RADP for FY2020, it was slashed by Tk. 9,800 crore (or
4.8%) to bring the size down to Tk. 192,921 crore. Project aid component
was reduced by Tk. 9,800 crore (or 13.6%) while local resources (Taka)
component remained the same
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 67Public Finance
China is currently co-financing or implementing about 13 projects in
transport and power sectors
The surge of COVID-19 has already slowed down the pace of some of these
key projects such PMPB project, Padma Bridge Rail Link, Construction
work of Dhaka-Ashulia elevated expressway, Construction of Joydebpur-
Ishwardi Dual-Gauge Railway Line, Construction of Multilane Road
Tunnel under River Karnaphuli
This coupled with slow pace in other foreign aided projects may affect the
implementation of the overall ADP in FY2020
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 68Public Finance
Budget Deficit and Financing
As CPD had suspected earlier, deficit crossed the threshold of 5% (5.5% of
GDP) for the first time in FY19
A significant revenue shortfall coupled with relatively higher public
expenditure growth in the early months may result in even higher overall
deficit financing by the end of FY20 compared to FY19
As per MoF, the overall deficit recorded a 128% growth during Jul-Dec of
FY20 which is already 17.7% of annual target
Lower subsidy demand in some cash incentives and lower utilisation of
project aid in mega projects may lower the overall expenditure at the end
of FY20.
However, as per the current trends in revenue collection and
public expenditure, deficit may increase to 5.5% of GDP in FY20
Depending on the extent of COVID-19 and associated costs and
policy measures, this may rise further
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 69Public Finance
Deficit financing was characterised by low net intake from foreign financing
sources as against a heavy reliance on domestic financing sources
Within domestic financing structure, high bank borrowing was the key
contributor in FY20 unlike previous fiscal years; the role of non-bank
borrowing was rather limited
Net borrowings from banking sources during Jul-Dec of FY2020 is already
about 66.0% of the annual target for FY2020 according to MoF data
(94.9% according to Bangladesh Bank data)
Deterioration in the utilisation of foreign resources in FY19 was a worrying
sign which also continued in FY2020 and may further exacerbate due to
COVID-19
Net foreign borrowing registered 22.1% growth in FY2019 (119.8% in
FY2018)
It recorded (-)47.8% growth during Jul-Dec of FY2020
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 70Section: 4.5
Monetary Policy
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 71What is the Standard Monetary Policy
During Such Crisis?
During such crisis when private consumption demand is depressed
and the risk of unemployment and income instability is high the
objective of monetary policy is to increase liquidity situation in the economy
Quantitative easing at the time of COVID-19 pandemic is a major option to
do so
This means injecting liquidity into financial institutions to give space for
functioning through purchase of treasury bonds and bills, and cutting
interest rates
Several countries have already taken a number of targeted measures
Source: IMF Blog (11 March, 2020). Monetary and Financial Stability during the Coronavirus
Outbreak. https://blogs.imf.org/2020/03/11/monetary-and-financial-stability-during-the-
coronavirus-outbreak/
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 72Global Monetary
Response to COVID-19
Central Measures
Banks
The People’s 100 billion Yuan injected into the market through medium term lending
Bank of China facility & 550 billion Yuan long-term funds will be injected through the cut
in reserve ratio
Reserve Bank 6-month dollar/rupee swap & Long-Term Repo Operations (LTRO) of up to
of India Rs 10 billion for liquidity boost
The Federal Interest rate cut to near 0% from 1.25% and injecting liquidity by purchasing
Reserve System $700 billion bond
(USA)
Bank of Canada Injection of $10 billion for businesses & interest rate cut to 0.75% from
1.25%
Bank of Interest rate cut to 0.75% t0.25%
England
European Bond purchase of 120 billion Euro; interest rate -0.5%
Central Bank
The Bank of 80 trillion yen set as upper limit for purchasing government bond. Banks
Japan would purchase exchange-traded funds of 12 trillion yen & investment funds
tied to Japanese real estate of 180 billion yen
CPD (2020): Health and Economic Risks of Corona Pandemic and Recommendations 73Bangladesh Bank’s Recent Measures:
Business-as-usual?
On the premise that borrowers may find it difficult to repay loans
during a time when the world economies including Bangladesh
economy are anticipated to be adversely affected by COVID-19,
Bangladesh Bank issued a circular and a circular letter on 19 March
2020 announcing that:
Loans that were classified on 1 January 2020 cannot be moved
to a lower category of classification until 30 June 2020
Loans that have benefitted from special rescheduling and one time exit
policy have to be categorized under special mention accounts (SMA)
Are these measures simply a continuation of the benefits
that are being offered to loan defaulters since May 2019?
Or, are these genuine measures taken to support the genuine victims
due to the threat of COVID-19?
Bangladesh Bank needs to ensure transparency in offering of such
benefits to the truly the affected ones.
Source: BRPD Circular No. 04: Loan Classification; BRPD Circular Letter No. 07: Special Policy on Loan Rescheduling and One Time Exit
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